Chamber grades Dodd-Frank — and hands out very few A's

SEC, money market reforms get D's; 'put politics aside'

When the Chamber of Commerce grades financial reform, it uses a pretty steep curve. The only time regulators receive an A is when they fail.

In a report card released Tuesday, the organization assessed 17 areas, including the regulation of derivatives, the Volker rule, the Consumer Financial Protection Bureau, systemic-risk designations, the whistleblower rule and money market fund reform. Most of them are related to the implementation of the Dodd-Frank financial reform bill.

Overall, the business lobbying group expressed concern that regulators are fixing problems that may not exist and, in the process, undermining capital markets.

“The Dodd-Frank Act was an incomplete bill passed in haste in the middle of a crisis,” the report states. “It does not address many of the core causes of the financial crisis or the weaknesses of our financial regulatory structure. Instead, it adds new regulatory agencies and layers to an already over-layered system while leaving critical areas unaddressed.”

In all but two of areas, the chamber gave regulators an “incomplete” grade because work on final rules is still going on. Each “incomplete” also came with a letter grade of A to D to indicate the direction in which the chamber thinks the regulatory process is heading.

The sole A was for a proxy-access rule promulgated by the Securities and Exchange Commission that was vacated by the U.S. Court of Appeals District of Columbia Circuit in July because of what the court called insufficient economic analysis.

“The D.C. Court's decision was a decisive blow to the SEC's first attempt at rule making under the Dodd-Frank Act, reiterating the importance for regulators to demonstrate that the benefits outweigh the costs,” the report states.

The cost-benefit theme runs throughout the report. For instance, the chamber asserts that the 2010 SEC reforms to money market funds have left them “well-positioned to endure financial market stresses.”

“Additional reforms are unnecessary and would fundamentally alter the effectiveness and efficiency of money market funds, making them a less useful source of investing and financing for everyone – Main Street businesses, state and local governments, and other organizations,” the report states.

The chamber gave the SEC a D for considering further reforms, which the agency may propose this spring. In order to improve the grade, the chamber recommends that the SEC “conduct a study to determine the effects of the 2010 reforms … and identify vulnerabilities that remain.” It also says the SEC should perform a thorough cost-benefit analysis of potential new rules.

The message the chamber is sending to regulators is simple, according to David Hirschmann, president and chief executive of its Center for Capital Markets Competitiveness.

“Take your time. Do it right,” Mr. Hirschmann said. “Put politics aside. Think of the health of American capital markets.”